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CU-Boulder profs calculate value smartphone users put on privacy

Pair surveyed more than 1,700 from San Diego to Atlanta

By Sarah Kuta Camera Staff Writer

Posted:
12/14/2013 12:22:33 PM MST

Updated:
12/14/2013 12:23:46 PM MST

In an era of National Security Agency leaks and smartphone applications that constantly monitor a user's location, contacts and other personal information, two University of Colorado economics professors hear a lot of talk about how important privacy is to the American people.

But words like important are "squishy" to economists, so CU researchers Donald Waldman and Scott Savage set out to learn exactly how valuable privacy is to the average consumer.

Their study, published this fall in Social Science Research Network, found that average smartphone users are willing to pay a few dollars for mobile apps that maintain privacy.

"Through the spring and summer, there were policy proposals put out there (about privacy)," Savage said. "We think as economists if you're going to propose these initiatives, you have to understand the costs and the benefits. We wanted to put a number out there. Instead of saying what you feel or anecdotally thinking privacy is important, let's put a number on it. Then people can have a real discussion."

Waldman and Savage's team surveyed 1,726 people over the summer in Denver, Atlanta, Chicago, Philadelphia, Portland, Salt Lake City and San Diego.

They found that consumers are willing to pay $4.05 to conceal contact lists, $3.58 to conceal the contents of text messages, $2.28 to shield browser history, $1.75 to block the phone's ID number and $1.19 to conceal personal locations.

But how much consumers are willing to pay for privacy varies depending on their age, experience with smartphones and other factors.

More experienced smartphone users are willing to pay more to conceal their contact lists and text messages than less experienced users, the study found, and young people are willing to pay less for privacy overall than older users.

The researchers said their findings support anecdotal evidence that many people do value their privacy.

What surprised the researchers was the number of respondents who weren't aware that their smartphone apps could access their contacts, text messages or location, Waldman said.

"They read about the NSA and Edward Snowden, but they didn't realize when they click on this simple icon and this app opens up what people were finding out about them," Waldman said.

But once people are informed about how their information is gathered, they have a "clear understanding of their preferences for privacy," the study said.

Waldman and Savage advocate for full disclosure of how apps use personal information, similar to the labeling of food contents. Many apps, they say, can save time and provide benefits to users, even though users may give up some privacy to use them.

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